Clients Pull, Zenefits Pushes Benefit Brokers to Adopt Tech

“The question is not if benefit agencies will go digital. The question is when. The answer … 2016.”

That’s how I began my technology talk at the California Association of Health Underwriters’ TechSummit on September 29th in Universal City. Several in attendance  asked for the presentation. Since the slides are mostly key words and graphs, I thought sharing the content here over a couple of posts would be more helpful.

I’ve been engaged in sales technology since the 1980’s (yes, Millennials, we had technology back then). However, the need for successful producers to embrace technology has never been greater. This first post explains why. Tomorrow I’ll offer a checklist brokers can use when selecting technology.

**************************

Consumers Pull, Competitors Push

Going digital is inevitable. Customers want it. Competitors make it necessary.

Customers are increasingly running their businesses with technology. They use digital tools to keep their teams informed and aligned, preserve and transfer documents, reach customers and track sales. Even traditionally low-tech companies—plumbers, barbers, dry cleaners—use technology to schedule appointments, process payments, track invoices and speed work flows.

Or consider this: in 2013, nearly half of Staples sales were over the Internet. This makes Staples the nation’s third largest online retailer behind Amazon and Apple and ahead of Walmart. The same survey found Office Depot was the ninth largest online retailer. That’s a lot of businesses, both large and small, using technology to buy something as prosaic as office supplies.

Digital activity by clients is creating a gravitational force pulling more-and-more benefit brokers into the tech orbit. After all, if your clients are using technology and conducting business online, shouldn’t you?

If customers are pulling brokers to go digital, competitors are pushing them in the same direction. In poker, if you look around the table and don’t see the sucker, you’re the sucker. Similarly, if you’re not using technology to grow your business, someone else is using technology to take your business.

Zenefits and Others Push Brokers Toward Tech

Exhibit A: Zenefits—the Donald Trump of benefit brokers. Like Mr. Trump, Zenefits can behave like a rich, arrogant bully. Yet, either because of or in spite of this character flaw, Mr. Trump and Zenefits have shaken up their worlds and highlighted weaknesses in established players.

Like Mr. Trump, Zenefits’ strategy seems to embrace trash talking competitors. Zenefits CEO Parker Conrad has promised that “If you’re an insurance broker, we’re going to drink your milkshake.” (At minute 1:30 of the linked-to video). He claims competing brokers “barely know how to use email.” (At minute 38 of the video). Mr. Conrad’s prognostication concerning today’s professional benefit brokers? “All of the existing brokers today are all f**ked.”  OK, even Mr. Trump doesn’t drop the f-bomb on his opponents in public, but that’s most likely just a generational difference in styles.

Some brokers complain that Zenefits is using its riches (the company has raised over $500 million dollars in capital) to post arguably misleading comparisons between itself and specific independent brokers—a tactic Mr. Trump might applaud. As I’ve written before, even though I find the comparisons unfair, this isn’t a new marketing tactic nor outside the norm in America.

Yet, for all his bombast and bullying, Mr. Trump has forced other Republican presidential candidates to step up their game (a task at which many are failing). They may not like him, but his opponents need to adapt to his presence. Zenefits and similar companies like Namely and Gusto are forcing brokers to adapt to new realities. In this new world, simply delivering value is no longer enough. Clients now need to perceive that value.

It’s Perceived Value that Matters

Benefit brokers have long provided considerable value to their clients. They shop the market and find the right solution for clients’ unique needs. They answer questions and resolve problems. They provide informed, personalized, professional counseling and advocacy on behalf of their clients before and after the sale. Simply put: they earn their commissions.

Yet, for too long, too many brokers have been hesitant to highlight their value. In fact, they often undermine how clients perceive their worth by claiming their services are free. This is both inaccurate (health insurance premiums include brokers’ commissions) and diminishing (consumers tend to undervalue what they don’t pay for).

Zenefits takes advantage of brokers’ modesty. They offer businesses free HR and benefit administration software in exchange for being named the employers’ broker-of-record. That’s an attractive deal when the software has perceived value and the services of the incumbent broker is hidden.

Technology can help put brokers’ value on display by providing greater insight into what brokers deliver. Increased transparency can lead to greater perceived value.

Significantly, Zenefits’ leadership knows this. When asked about the company’s competitors, Sam Blond, head of sales at Zenefits, claimed they had none. He grudgingly acknowledged that professional brokers could fill that role, but “what you get with a traditional health insurance broker is no technology.(At about 28:30 in the video).

Zenefits and new firms like them have seized on this digital gap to tilt the playing field in their favor. When your competitor points a neon arrow at your problem, it’s smart to pay attention. Many brokers are and that’s what’s pushing them toward increased use of technology.

Successful Brokers Leverage Tech

Competition from well-funded technology firms has never been greater, but there’s nothing new about the role technology plays in helping brokers get ahead. My book, Trailblazed: Proven Paths to Sales Success, grew out of a study of 200 health insurance brokers in six states. The study sought to identify what practices, processes and perspectives fast-growing sales professionals shared that their less successful colleagues did not.

Among our findings was that high-growth producers were significantly more likely to incorporate technology into their business than the others. They were more likely to use technology across a broader range of functions, too. Brokers whose business was declining were the least likely to have incorporated technology into their practice.

When I led individual and small group sales at WellPoint (now Anthem) I championed the 1999 launch of AgentConnect, which enabled our agents to sell individual coverage online through their own websites. While competitors (think PacifiCare) were trying to displace brokers using the Internet, we used it to empower brokers. The result: WellPoint increased our market share while hundreds (and eventually thousands) of independent agents launched online sales initiatives. Many of them ranked among WellPoint’s top producers.

WellPoint’s AgentConnect launched 16 years ago, but was not the first sales technology adopted by successful benefit brokers. I was helping program the quoting system for Multiple Services (the small group general agency my father, Sam Katz, founded in Los Angeles) in 1983. And there were digital sales tools available before then.

Not If, When

Technology has been a part of the employee benefit world for a very long time. The increased pull of clients and push of competitors just makes the need to leverage tech tools more pressing ever before. As noted at the start of this post, the question is when will brokers will go digital. I believe the answer is early next year.

Many brokers have already adopted innovative technologies. The majority, however, have not and now face a dilemma. Do they deploy new digital tools—or ask their clients to deploy new technology—in the middle of open enrollments, ACA calculations and the host of other time-consuming, business-threatening challenges all happening between now and the end of the year? Or, do they wait until 2016 to leverage the tools available to them?

I have a stake in the answer (as disclosed, below), but even if I didn’t, I’d bet most brokers will fight their way through the rest of 2015 with the tools they have before transforming their agencies with new technologies.

Being thoughtful about the technology you embrace is important, because the decision is critical. Not only are you entrusting your livelihood to the technology, you’re entrusting your reputation and your clients’ well-being to the platform you choose. Adopting technology costs more than money, there’s a host of hidden expenses as well. I’ll discuss these and other factors, as well as offer a checklist to help you evaluate your technology options, in tomorrow’s post.

*************************************
Full Disclosure: I’m a co-founder and CEO of Take 44, Inc., a technology company which, in early 2016, will launch NextAgency. The NextAgency platform will integrate quoting, CRM and enrollment tools to help brokers sell more with powerful HR and benefit administration tools they can give to clients for free. This is in pursuit of our mission: to help benefit brokers level the playing field against high-tech disruptors like Zenefits while spotlighting their high-touch value.

 

Pointed Questions for WellPoint

On February 24th WellPoint CEO Angela Brady will appear before the House Energy & Commerce Committee. She will attempt to explain why the company’s California operating unit, Anthem Blue Cross of California, recently sought to raise rates on some individual policy holders upward of 39 percent. While the effective date of the rate increase was postponed, the hearing is not. And that it is being held the day before President Barack Obama’s bi-partisan health care reform summit with Congressional leaders is no coincidence. The Administration and others have pointed to the rate increase as one of the reasons comprehensive health care reform – or at least health insurance reform – is needed.

In preparation for the hearing, House & Energy Committee Chair Henry Waxman and Subcommittee on Oversight and Investigations Chair Bart Stupak sent a letter to Ms. Braly asking for background information. The information ranges from the general (“reasons for the premium rate increase”) to the specific (for 2005-2008, “a table listing, as applicable, premium revenue, claims payments, sales expenses, other general or administrative expenses, and profits for all individual health insurance products”) to what some might call a fishing expedition “all internal communications, including e-mail, to or from senior corporate management relating to the company’s decision to increase premium rates in California in the individual health insurance market.”)

The hearing will be closely watched, not only by lawmakers but by WellPoint’s competitors. It could provide an interesting glimpse into the rate making process employed by health insurance carriers. The information will certainly be cited by advocates – and opponents – of requiring carriers to spend a certain percentage of the premiums they take in on medical claims as opposed to administrative expenses and profits.

Ms. Braly’s testimony will also likely highlight the different ways politicians and business people view the same data. What to a member of Congress may look like profiteering could look to an executive like a prudent hedge against unknown risk.

The Associated Press has taken a balanced approach to explaining the issues behind the Anthem Blue Cross of California rate increase. The analysis is worthwhile reading for anyone following this particular controversy. Among its conclusions: rising medical costs are the main driver of rate hikes, not profits; health insurance rate regulations vary considerably from state-to-state; non-profit health plans also have large rate increases; carriers can’t, and probably shouldn’t, subsidize rates for one business line in one state with profits earned by other lines of business, especially in other states; and that there’s a lot of elements taken into consideration by carriers when they set their rates. While there’s little specifics many insurance professionals don’t already know (other than the make-up of WellPoint’s profits), it’s a very useful summary and analysis of the issues.

The timing of Anthem Blue Cross of California’s rate increase is generally perceived as constituting political malpractice. But there may be a silver lining. Ms. Braly has an opportunity to educate lawmakers on how and why carriers charge the health insurance premiums they do. If members of the Energy & Commerce Committee are willing to look beyond the politics of the rate increase, they might gain a better understanding of how health insurance works in this country.

Public and Private Sectors Facing Tough Health Care Decisions

I’ve written numerous times in this blog on what’s needed to achieve meaningful health are reform: increase access to health care coverage; and constrain escalating medical costs. The latter is the most important. If we don’t get control of health care costs we won’t be able to afford to provide access. Not only that, health care costs will vacuum resources away from other important societal needs.

There’s been some success in recent years on increasing access. The State Children Health Insurance Plan has resulted in coverage for millions of children that otherwise would likely to have gone without. Carriers have created innovative products that have proved popular with young people and those seeking catastrophic coverage. (There’s also been numerous disappointments during that time, when opportunities to expand coverage failed).

In fact, a substantial component of the uninsured could obtain coverage today. As Aetna CEO Ron Williams noted at a meeting of the Business Council in Florida last week, 20 percent of the uninsured are eligible for Medicaid and the state children’s health programs, but fail to enroll in those programs. In an article on the conference by Jason Szep of Reuters, Mr. Williams also noted that 10 percent of the nation’s 47 million uninsured are college students and “could be easily and relatively cheaply enrolled for health care insurance.”

At the same conference, Angela Braly, the CEO of WellPoint, called for expansion of programs aimed at children and low-income families. WellPoint estimates this could cut the uninsured by 25 million if all 50 states acted to cover all children and increasing eligibility for Medicaid.

It’s true that too many of those eligible for public programs fail to enroll in them. It’s true that some states have had success in requiring college students to have health care coverage. And it’s true that expanding children and low-income health programs would bring many of today’s uninsured into the system. The problem, however, is that these programs are under tremendous stress. The safety net that has assured health care for all is crumbling.

In Los Angeles, for example, there are plans to shut 11 health clinics to meet the county’s $195-$331 million budget deficit. According to the Los Angeles Times,  a majority of the Board of Supervisors opposes these closures, but simultaneously, health officials are drawing up contingency plans that would shutter all of the county’s health clinics — facilities that provide “more than 160,000 urgent care visits and nearly 180,000 specialty care visits a year, mostly from the uninsured and poor.”

Meanwhile, in Sacramento, doctors providing care to Medicaid patients will see their reimbursement rates cut by 10 percent as the state makes a mid-year adjustment to its hemorrhaging budget. As a result, fewer physicians are likely to accept new Medicaid patients or some may stop seeing program participants altogether.

America’s current health care system is already a mix of private and public health care programs. The private sector is under attack for its rescission practices, among other issues. The public sector is going broke and, even in the best of economies, seems unable to reach out to all those promised care.

What’s needed is a national dialogue about priorities. If Americans are serious about expanding coverage, they’re going to have to find a way to pay for it in good economic times or bad. And that means keeping it affordable. States should not balance their budgets by breaking their promise to those whom they promised coverage.

The private sector is also going to have to clean up its act. Behaving legally is not enough, they have to act right. Carriers need to act in ways that earns the public’s respect by demonstrating an appreciation of the critical role these enterprises play in society — a role that requires them to meet a higher standard than most corporations. Business as usual could mean no business at all.

There’s a strong demand among voters to change the country’s health care system. Given all that’s happening, that’s not surprising. And, given all that’s happening, it’s not going to be easy, either.

Blue Cross of California

First, full disclosure: I was a Senior Vice President at Blue Cross of California, or its parent company WellPoint from September 1997 through November 2005. While my precise responsibilities varied during those eight years, they centered around helping the company grow its Individual and Small Group business. Before joining and since leaving WellPoint, I’ve continued to work with Blue Cross while also having the pleasure of working with its competitors. I greatly respect those carriers, for many of the reasons I respect Blue Cross.

But it’s Blue Cross that has been in the news so much since I started this blog. Yet I’ve purposefully avoided posting on its situation and probably won’t post on it again. It’s too much of a no-win situation for me. If I’m too supportive, then I’m just being defensive. If I’m too harsh, I’m misusing my former insider status.

However, with the Department of Managed Care holding hearings on Blue Cross yesterday, and so many readers knowing of my affiliation with the company, I thought it permissible to make an exception. But this won’t be a post about the the substance of the charges. It’s more personal in nature.

I view the public pilloring of Blue Cross by the Department of Managed Health Care with mixed emotions. I enjoy seeing big companies brought to task as much as the next guy. It’s like watching toothpick thin famous-for-being-celebrity-types doing perp walks. Or watching bombastic politicians busted for the behavior they publicly decry. There’s a karmic aspect of it all that we humans seem to enjoy, the reasurrring balancing of forces in the universe.

So seeing a regulator take Blue Cross to task doesn’t bother me. It’s a part of the process. What prompts me to write, however, is how all this impacts the people of Blue Cross who have accomplished over the years.

The individuals representing the company at the hearing are friends and former colleagues of mine. I’ve seen them at work. Yes, it’s true they paid attention to the bottom line. That’s how any enterprise — for-profit or non-profit — stays in business. But I’ve also seen them striving to do the right thing for their members when no one outside the company was watching. I’ve seen them invest sweat, time and resources to improve customer service. I’ve seen how hard they’ve strived to create new ways of helping those with serious diseases improve their quality of life and medical outcomes. I’ve seen the efforts they’ve made — and the risks they’ve taken — to bring to market products which provide strong coverage at the lowest possible price in the face of skyrocketing health care costs.

Blue Cross is not a perfect company. There are no perfect companies — nor perfect people or government agencies, for that matter. They’ve made mistakes and where those mistakes violate law or regulations they should be appropriately punished. Further, Blue Cross has made their situation worse over the years by sporadically descending into moments of hubris and arrogance — and sometimes just plain public relations mindlessness. They’ve also taken risks to make things better, which means at times, they’ve failed and made things worse.

But Blue Cross of California is no Enron. There aren’t people there conspiring to rip off the innocent. It is a company by and large of people trying to do a good job for their members, their business partners and yes, their shareholders. (Traits they share with most of their competitors and respected companies everywhere).

Few things in life are clear cut. There’s a context and subtlety that gets overlooked in the circus-like atmosphere of a public scolding. Maybe every business and every industry needs to go through this now and again. When done right the results can be positive change. At worse, the hot water may help keep the enterprise humble. It’s just a shame that in the process, the people which make up the company and who are trying to do the right thing, can get scalded along the way.